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QUALCOMM, Inc. (NASDAQ:QCOM) Gets Cracked on Falling Sales

QUALCOMM, Inc. (NASDAQ:QCOM) just announced Q4 (Sep) earnings of $0.90 per share, excluding non-recurring items, $0.06 better than the S&P Capital IQ Consensus of $0.84; revenues fell 2.1% year/year to $5.83 bln vs the $5.54 bln S&P Capital IQ Consensus.

In addition, the company issued guidance for Q1 (Dec), sees EPS of $1.05-1.15, includes tax benefits from foreign subs, may not be comparable to $0.92 S&P Capital IQ Consensus; sees Q1 revs of $4.50-5.30 bln vs. $5.58 bln S&P Capital IQ Consensus.

QUALCOMM, Inc. (NASDAQ:QCOM) bills itself a company that designs, develops, manufactures, and markets digital communication products worldwide.

It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).

The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access, and other technologies for use in wireless voice and data communications, networking, application processing, multimedia, and global positioning system products.

The QTL segment grants licenses or provides rights to use portions of its intellectual property portfolio, which include various patent rights useful in the manufacture and sale of wireless products comprising products implementing CDMA2000, wideband CDMA, CDMA time division duplex, and/or long term evolution standards and their derivatives.

The QSI segment invests in early-stage companies in various industries, including automotive, Internet of things, mobile, data center, and healthcare for supporting the design and introduction of new products and services for voice and data communications, and new industry segments.

The company also provides products and services for mobile health; products designed for the implementation of small cells; development, and other services and related products to the United States government agencies and their contractors; and software products, and content and push-to-talk enablement services to wireless operators. In addition, it licenses chipset technology, and products and services for use in data centers. QUALCOMM Incorporated was founded in 1985 and is headquartered in San Diego, California.


Sell Side Notes

Cascend Research notes QCOM beat Q3 consensus expectations but there were concerns over the Q4 outlook. Revenues of $4.9b is much lower than consensus of $5.57b. Over 50% of the downside was due to Apple which the firm was surprised that this had not already been taken out. The rest was weakness in China smartphones (even with better mix) EPS of $1.10 is above consensus of $0.95, but this is mainly due to a much better (temporary) tax rate. Firm states that the AAPL news had been expected but the pace is faster than most forecast. Firm is maintaining a Buy on the stock despite the guidance because of 5G and its longer-term prospects.

Cowen & Co notes QCOM reported a strong beat, but issued soft F1Q guidance as Apple headwinds (not just modem revenue losses Y/Y, but seasonally concentrated revenue across the modem, PMIC, and certain RF components in both Qualcomm- and Intel-based designs) and a weaker China smartphone market impacted the DecQ outlook. While we had anticipated significant Y/Y Apple QCT headwinds, the concentrated seasonal nature of sales was surprising it’s long-term thesis based on the organic value of Qualcomm’s wireless chip/IP portfolio and upside from QTL resolutions remains unchanged. However, NT results are disappointing. Cowen sees compelling risk/reward into both 5G catalysts and significant EPS upside from Apple/Huawei resolutions along with the buyback; however, our F2019 baseline for these catalysts moves lower. Maintain Outperform; PT to $73.

The announcement came in amid action that hasn’t been particularly fun for QCOM shareholders. Over the past week, shares of the stock have suffered from clear selling pressure, dropping by roughly -10% even with the push higher on the news. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -12%.

QUALCOMM, Inc. (NASDAQ:QCOM) pulled in sales of $5.6B in its last reported quarterly financials, representing top line growth of 4.2%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($35.9B against $16.2B).

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